A four-month review by ISO New England’s market monitoring department found no evidence of anti-competitive behavior among power generators during mid-January’s bitterly cold weather in the region, and determined that requests for outages for economic reasons were within established market rules and ultimately had no impact on reliability or real-time prices during the period.

The grid operator last Monday released an interim report concluding that New England’s power system and wholesale electricity markets operated reliably despite the combination of extreme cold, an unexpected number of power plant outages, and record high electricity and natural gas use during the timeframe examined in mid-January.

The report advises, however, that the growing interdependence of the electricity and natural gas markets requires closer coordination between the two.

“The cold snap provided a key test of ISO New England’s management of the power grid and the competitive wholesale electricity markets,” said Gordon van Welie, President and Chief Executive Officer of ISO New England. “The cold weather pushed the electricity system near to its limits. Under these abnormally severe conditions, we were able to maintain reliability and keep power flowing to New England’s electric customers.”

The interim report’s recommendations and conclusions were confirmed by David Patton, President, Potomac Economics, Ltd., who is ISO New England’s independent market monitor.

In a letter to the ISO NE Board of Directors, Patton endorses ISO New England’s findings and states that ISO New England “thoroughly evaluates the market conditions and other factors that contributed to the outcomes during cold snap.”

The interim report, “Electricity Supply Conditions in New England during the January 14-16, 2004 Cold Snap,” evaluates three days of record high winter electricity use during which a combination of factors, including mechanical problems and fuel constraints for power producers, impacted the availability of generating units in New England.

During the period reviewed, New England winter electricity use reached an all-time record of 22,817 MW on Jan. 15, 2004. In addition, generator outages were far above normal levels with nearly 9,000 MW of power unavailable compared to historical levels of approximately 3,100 MW. Gas-fired generators accounted for more than 80% of the unavailable power.

The interim report identified several short-term and long-term actions to improve reliability and market efficiency during the winter months. These recommendations include:

“Historically, we have been most at risk of power outages in the summer, but winter can be a concern as well,” van Welie said. “New England’s dependence on natural gas to fuel a large portion of the region’s power supply resources can cause acute problems during periods of extreme cold temperatures.”

The interim report reviewed the steps ISO New England took to ensure the reliability of the power supply, including activating its demand response program to reduce electricity use, and directing the return to service of all units previously granted outages, canceling all work on critical transmission lines, generators, and communications links, arranging for additional supply from New York, and public appeals for voluntary conservation which included notifications about the power supply situation.

“Events such as those that occurred last January are not only challenges but opportunities for us to find new ways to improve the reliability of the power grid,” said van Welie. “These recommendations are based on the operational experience gained from the January cold snap and will lead to a stronger system.”

An executive summary and the full text of ISO New England’s interim report can be found on its Web site www.iso-ne.com. The final report will be produced in the late summer, early fall after comments and feedback are received from industry and government stakeholders.

FERC’s Office of Market Oversight and Investigations (OMOI) recently concluded that New England power generators did not break any rules by selling natural gas to local utilities rather than using it to produce power during the cold snap in January (see NGI, April 5).

ISO New England “successfully managed the stress condition,” and the shift of gas by power generators to local gas distribution companies (LDC) “helped the heating market survive,” according to the preliminary results of an OMOI investigation. FERC’s preliminary findings cover the Jan. 12-16 period.

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